How Does Equity Release on Jointly Owned Property Work?
Contributors:
Expert Verified- Jointly owned property can opt into equity release, selling a portion of it to a provider—who recoups their money when you move out or pass away—while maintaining the right to live in it.
- The safety of this financial decision hinges on your specific situation, with factors including age, home value, and future finances, so always consider consulting a provider or advisor who can help you with equity release and navigating the application.
- The advantages include increased cash flow and the ability to stay in your home, while the disadvantages may include reduced inheritance and a potential impact on benefits.
So, you’re considering releasing equity from your property, which is jointly owned?
You’re not alone!
Did you know that UK homeowners aged 65 and over collectively own nearly £2.6 trillion in property wealth? 1
Yet, a surprising amount of this wealth remains locked up, inaccessible primarily to the very people it belongs to.
Let’s explore jointly owned property equity release – an often misunderstood option that could potentially unlock your home’s value and give you access to tax-free cash.
Our editorial team at Every Investor has considerable knowledge in this area, and we aim to clarify common misconceptions and provide comprehensive information about equity release joint ownership.
In This Article, You Will Discover:
This article aims to provide comprehensive information on jointly owned property equity release, but it shouldn’t replace the advice of a professional financial advisor.
Let’s delve into how you may be able to access your property’s value.
What Is Understood by the Term Equity Release?
Equity release, aimed at homeowners 55 or older, allows you to access the capital value of your home.
So, equity release is it worth it?
Yes. It can be a vital tool for covering care costs or adapting your home for mobility needs.
The two prevalent forms of equity release are lifetime mortgages and home reversion plans.
A lifetime mortgage is a loan against your home, repayable from your estate.
Home reversion, in contrast, involves selling a portion of your home in exchange for a lump sum or regular payments, while maintaining residency.
Learn More: What Is Equity Release?
What is Shared Ownership Equity Release in the UK?
Shared Ownership Equity Release (SOER) in the UK is a financial scheme that allows homeowners, typically over the age of 55, to free up some of the value tied up in their property.
Essentially, it’s a way of retaining your home while accessing its capital value.
This process involves selling a portion of your property’s future worth to an equity release company, allowing you to remain in your home while providing a cash lump sum or regular income.
The uniqueness of SOER lies in its flexibility.
You can choose to sell between 25% to 100% of your home’s future value, depending on how much money you need.
This scheme still allows you to benefit from any future increase in your property’s value according to the percentage you retain.
Please note, however, that you’re also responsible for a corresponding proportion of any fall in value.
Can You Get Equity Release With Joint Ownership?
You can obtain a joint owner equity release for up to 2 homeowners who share a single property.
Both homeowners must be within the minimum age requirements stipulated by the selected plan.
Here’s some important information to help you determine if you qualify.
How Does Shared Ownership Equity Release Work?
Shared ownership equity release allows co-owners of a property, typically partners or spouses, to unlock the value tied up in their home while continuing to live there.
Both parties must meet the minimum age requirements – typically 55 – specified by the equity release provider.
The amount that can be released depends on several factors, such as the home’s value, the age of the youngest homeowner, and the specific plan chosen.
When both parties have passed away or moved into permanent long-term care, the property is usually sold, and the proceeds are used to pay off the equity release loan and any accumulated interest.
Any remaining funds after the repayment are distributed to the beneficiaries of the estate.
The key benefit of a joint equity release plan is that if one homeowner passes away, the surviving plan holder can stay in their home until they pass away or move into long-term care.
It’s vital to obtain professional help from an equity release advisor or broker to understand the potential impacts on estate value and entitlements to means-tested benefits.
The Difference Between Joint Tenancy & Tenants-In-Common
Joint tenancy refers to equal property ownership, with each owner having an equal right to the property’s entirety.
Upon an owner’s death, the surviving owner acquires the deceased’s share.
On the other hand, tenants-in-common may own unequal shares, and ownership does not automatically pass to the surviving owner upon death – it’s determined by the deceased’s will or intestacy laws.
Equity release isn’t a one-size-fits-all solution and carries potential risks, so it’s vital for an experienced equity release advisor or broker to assess your financial situation before proceeding.
How Do I Know if We Own Our Property as Joint Tenancy or Tenants-In-Common?
You can find out whether you own your property as joint tenants or tenants-in-common by checking your property’s title deeds or the register held by the Land Registry.2
Can You Get Equity Release on Your Share of a Co-Owned Property?
No, generally, in the UK, you cannot get equity release on just your share of a co-owned property, and both homeowners typically need to enter into the agreement jointly.
This is mainly to ensure the lender can take full possession of the property to repay the loan after all owners have died or moved into permanent long-term care.
Can You Get Equity Release When More Than 2 People Own the Property?
No, you can’t currently get equity release on a property that is owned by more than 2 people. You can only get a single or a joint equity release plan.
If there are more than 2 people on the title deeds, then the additional owners would have to agree to be removed from the title deeds through a buy-out or alternative arrangements.
Can I Take Out an Equity Release Plan if I Own Property Jointly With a Business or Trust?
Typically you can’t take out equity release if you own property with a business or trust.
To be eligible for equity release, the property must be owned by individuals.
If you fall into this category, then a qualified equity release advisor could talk you through your options.
What Are the Age & Eligibility Criteria for Equity Release on a Jointly Owned Property?
The eligibility criteria for equity release on a jointly owned property include age restrictions where the youngest homeowner must be at least 55, though some providers may set a minimum age of 60.
Additional criteria include:
- All homeowners must agree to the equity release.
- The property must be your primary residence.
- The property must typically be of a particular value, with no (or a minor) outstanding mortgage.
- Some providers also have additional requirements regarding the property’s type, condition, and location.
Do Both Homeowners Have to Be Over 55 for Equity Release?
Yes, both homeowners must be over 55 to qualify for a joint equity release plan.
What Are the Options if One Shared Owner Is Under 55?
If one owner is under 55, equity release may not be an option for that property under current guidelines.
In such cases, alternative options may include waiting until both parties reach the required age or considering other financial solutions such as remortgaging, taking out a personal loan, or downsizing.
Can a Younger Unqualifying Homeowner Be Excluded From an Equity Release Application?
Yes, a younger unqualifying homeowner can be excluded from an equity release application, but it requires transferring their share of the property into the qualifying homeowner’s name.
In other words, the title deeds must be changed from joint to single ownership.
It’s important to note that in such a case, the equity release loan will only be issued in the name of the qualifying homeowner.
A qualified equity release advisor or broker can help you run through the implications this strategy could have on the costs and occupancy of your home if the homeowner passes away or enters long-term care.
What Are the Deed Considerations for Equity Release on a Joint Owned Property?
The deed considerations for equity release on a jointly owned property include whether both owners agree to the plan and whether the property ownership structure (joint tenancy or tenants-in-common) affects eligibility.
Does Equity Release Have to Be in Joint Names?
Yes, equity release on the jointly owned property must be taken out in the joint names of the owners.
Can 2 People Have Equity Release if Only 1 Name Is on the Deeds?
No, 2 people can’t have equity release if only 1 name is on the deeds.
Only the person whose name is on the deeds can apply for and receive equity release.
As long as the other person fulfills the equity release requirements, they could become a joint owner, but this could come at an additional cost when changing the title deeds and may negate the benefits.
Can 1 Person Take Out Equity Release if 2 Names are on the Deeds?
No, 1 person can’t take out equity release if 2 names are on the deeds. All legal owners must agree to the equity release plan.
How Much Equity Can Joint Applicants Release?
The amount of equity that joint applicants can release primarily depends on the age of the youngest homeowner and the property’s value.
The older the youngest homeowner is, the higher the percentage of the property’s value that can be released.
Common Questions
Can Joint Owners Individually Release Different Amounts of Equity?
Is There a Jointly Owned Property Equity Release Calculator?
What Happens to Your Equity Release Plan When One Owner Dies?
What Happens to the Equity Release Plan if the Jointly Owned Property Is Sold?
How Does the ‘No Negative Equity’ Guarantee Work in this Context?
What if One Owner Wants to Release Equity but the Other Doesn’t?
What Happens to the Equity Release Plan if the Owners Decide to Dissolve Their Partnership?
How Do You Get Equity Release if One Owner Has Already Passed Away?
Can My Husband Release Equity Without My Consent?
What Is The Maximum Equity Release LTV (Loan To Value)?
What Is Shared Ownership Equity Release?
How Does Shared Ownership Equity Release Work in the UK?
Is Shared Ownership Equity Release a Safe Option for Me?
What Are the Pros and Cons of Shared Ownership Equity Release?
How Can I Apply for Shared Ownership Equity Release?
In Conclusion
Jointly owned property equity release can be an effective way for co-owners to unlock wealth from their property.
It requires careful consideration and agreement from all parties involved, along with professional advice, to navigate the complexities and ensure the plan suits everyone’s needs.
This is specifically important when you’re considering jointly owned property equity release.